Telecom Operators' Transformation in the Era of OTT, Virtual Operators, and IT Convergence

Facing a surge in data traffic and the impact of OTT services, traditional telecom networks must transform, as hardware‑centric models become outdated with the rise of cloud computing and virtualization.

Historical Misjudgment

When telecom operators were at the core of the industry chain, they emphasized CT (communication technology) over IT, treating internet services as CT value‑added rather than IT value‑added, which misled operators and benefited internet companies.

This misconception merged IT infrastructure services with CT infrastructure, overlooking the competitive advantage of IT‑based value‑added services while CT focused on pipeline traffic, losing revenue to internet players.

The OTT (Over The Top) phenomenon is likened to a farmer trying to pick fruit from a taller plant; the IT side overtakes the CT side, capturing the “fruit.”

Because of the mistaken view that “the internet is a telecom value‑added service,” CT missed the true IT value source, failing to sow the “seed” of IT and thus missing the “fruit.”

CT Must Move Toward IT

Complete conversion is impossible; operators must retain their core pipeline business while investing in key IT infrastructure to balance low‑risk, high‑value IT services with high‑risk, high‑return IT innovations.

Impact of Smartphone Manufacturers

Apple’s software‑based eSIM allows users to switch carriers without a physical SIM, threatening the traditional carrier‑consumer link and potentially eroding post‑paid contract models.

Huawei’s “Skyline” app in Honor phones lets travelers use local networks without swapping SIM cards, further reducing carrier control.

Big‑Data‑Driven Strategy

Leveraging big‑data techniques to analyze user behavior is crucial; losing user data hampers operators’ ability to develop new services.

Virtual Operators Competition

Since receiving licenses in late 2013, virtual operators have grown rapidly, attracting users with cheaper tariffs and aiming for niche markets, while giants like Google plan to become virtual network operators to pressure traditional carriers.

Domestic Operators’ Transformation Actions

In response to OTT pressure, China Mobile adopted an aggressive “counter‑attack” strategy, China Telecom supported another internet giant, and China Unicom pursued full cooperation with WeChat, launching the “Wo Card.”

China Mobile: Business Integration and Feixin Revamp

China Mobile consolidated nine bases into two entities—Migu Culture Technology Group for digital content and an Internet company—while attempting to revitalize the Feixin service amid competition from WeChat.

China Telecom: Private Capital and “De‑telecom‑ization”

China Telecom opened up to private investment, allowing internet firms to take equity stakes and forming joint ventures for services like Yixin.

China Unicom: Full Embrace of Internet Giants

China Unicom, the smallest of the three, partners with Baidu products to build a knowledge‑sharing platform and establishes a venture capital arm to support internet‑focused startups.

Organizational and Leadership Adjustments

China Mobile appointed Ministry of Industry and Information Technology Vice Minister Shang Bing as Chairman and Party Secretary.

China Unicom and China Telecom swapped top executives, with former China Unicom Chairman Chang Xiaobing moving to China Telecom and Wang Xiaochu moving to China Unicom.

These changes are unlikely to alter the overall market structure, where China Mobile retains clear advantages in scale and revenue.

Operators’ Response Strategy

Building “soft power” through SDN, NFV, and related technologies should be a priority, as it activates network resources, makes services more flexible, and fuels ongoing transformation.

Internet data (the “cargo”) travels over telecom pipelines (the “road”). Operators must ensure the road is smooth, while internet players care about the cargo; thus, operators need to create fast lanes for key customers, understand their needs, and invest in high‑speed infrastructure such as 5G and high‑capacity backbones.

Conclusion

The current trend of “de‑telecom‑ization” or “telecom‑to‑IT” requires operators to strengthen weak IT links, seize the opportunity to move beyond OTT shadows, and cultivate new growth by planting IT “seeds” for future harvests.